Warren Buffet describes successful investing as
“To invest successfully over a life time does not require a stratospheric IQ, unusual business insights or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from overriding that framework”
Successful investing is a little bit like flying. You can chose to ride in a comfortable plane flown by a professional pilot or you can chose to fly in your own plane. If you want to fly yourself, it’s a good idea to learn how it works, before you buy the plane!
Either way, we can help you. With investing that is, not planes! Contact us before you start putting your hard earned money into any form of investment. We can also help with a existing portfolio that needs a review.
What are your goals?
Start by setting your investment goals. Since each investment will vary in its potential for risk and returns, you need to choose the right investments to help you achieve your goals:
- short-term goals—like saving to pay for a car or holiday in the next six months to two years
- medium-term goals—what you want to achieve in the next two to five years, like starting a business
- long-term goals—if your goal is more than five years away, like saving for a child’s education.
As a potential investor, you can be exposed to many investment promotions every day. That’s why it’s important to understand the basics of investment strategies.
These include principles like diversification and dollar cost averaging, designed to help your investments work to achieve your goals.
Choosing the right investment option
Invest some time in making the right choices
Once you’ve put some thought into your short, medium or long-term investment goals, it’s time to look into your investment options. Certain types of investments, or asset classes, may help you reach your goals in a way that suits you.
When considering different investments, consider some key points.
Your risk tolerance
Your risk tolerance is affected by two key factors: the amount of time you have to invest and your attitude to risk.
We’ll provide you with access to a world leading online risk profiling tool and take you through your individual results to help you understand how you feel about markets going up and down and managing the risks of achieving your objectives.
It’s true that every investment involves some risk, but some are generally more unpredictable or volatile than others.
If you have a long-term goal, you may have time to ride through the market’s ups and downs and thereby even-out the impact of risk on your investment.
On the other hand, if your goal is short-term, you may choose to take a more conservative approach, because you won’t have the luxury of time.
But if you’re comfortable taking risks and you have big investment goals, you may decide to invest in riskier options. If you’re a conservative investor, you’re likely to prefer safer investment options, even over the long term.
The type of investment
Your risk tolerance will influence the type of investments you make:
|Investment type (asset class)||General risk-return level|
|Cash (savings accounts, term deposits)||Low risk, possibly low returns|
|Fixed income (bonds, debentures)||Low risk, investments can be linked to inflation rate|
|Property (buildings, land, factories)||Moderate to high risk|
|Equities (shares)||High risk due to numerous economic and global factors|
We’ve covered some basic types of investments, but you could also consider:
- insurance bonds — They’re flexible, tax-effective investments for medium to long-term goals. You can invest a single lump sum or make regular contributions to build your wealth.
- managed funds — Your money is pooled with that of many investors and invested across a range of asset classes and managed by a trustee or professional fund manager.
- investing in property through a managed fund or super fund — This could give you exposure to a wide range of properties in Australia and overseas, which provides you with investment diversification so not all your eggs are in one basket.
For more information about investing please contact EagleView Financial on p: 02 9956 7999 .